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International Telephone and Telegraph Corp. v. Envirco Services Inc.

Decided: September 28, 1976.

INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, A CORPORATION OF THE STATE OF DELAWARE, PLAINTIFF, ATLAS STEEL PRODUCTS COMPANY, A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT,
v.
ENVIRCO SERVICES, INC., A CORPORATION OF THE STATE OF NEW JERSEY, KOLKER CONSTRUCTION CORP., A CORPORATION OF THE STATE OF NEW JERSEY, FRANK LAPEYROLERIE, DOUGLAS FORD AND CARL ROSS, DEFENDANTS, CENTRAL PARKWAY ASSOCIATES, A PARTNERSHIP, DEFENDANT-APPELLANT AND CROSS-RESPONDENT



Carton, Kole and Larner. The opinion of the court was delivered by Larner, J.A.D.

Larner

This appeal relates to the claim of a subcontractor, Atlas Steel Products Company (Atlas), against a property owner, Central Parkway Associates (CPA), based upon stop notices for work and materials furnished in the construction of a professional office building. In the latter part of 1971 CPA engaged Kolker Construction Corp. (Kolker) as general contractor to construct the building pursuant to a written contract at a total cost of $1,050,000. In December 1971 the owner filed the contract and specifications with the Essex County Clerk in accordance with the provisions of N.J.S.A. 2A:44-75.

Kolker engaged several subcontractors, including Atlas, and commenced performance of the contract. The trial

judge found as a fact that as of November 1972 Kolker defaulted on his contract in several respects, so that by early December 1972 he either abandoned or was justifiably removed from the job.

Between November 2, 1972 and January 1973 Atlas filed and served several stop notices for moneys due from Kolker in the total sum of $78,300, pursuant to N.J.S.A. 2A:44-77 to 79.

Upon default by Kolker the principals of CPA undertook the completion of the building through the formation of a new corporation*fn1 as the general contractor and the services of a group of contractors under the supervision of a consulting engineer. Among the contractors retained by the newly formed corporation were Atlas and other firms that had formerly worked on the project under contract with Kolker.

The project continued to near completion as of the time of trial, at a greatly increased cost to CPA. The judge found that the overall cost of construction to the owner was approximately $1,500,000 instead of the Kolker contract price of $1,050,000. Kolker had been paid approximately $700,000 prior to the default and prior to the filing of the stop notices, so that CPA incurred an additional cash payout subsequent thereto to other contractors and materialmen in a sum approximating $800,000.

The filed contract provided for progress payments to Kolker which accounted for the $700,000 paid prior to default. In addition there was a provision for retainages by the owner amounting to 10% of the progress payments, which were withheld from Kolker by CPA. The contract further provided that when the architect issued certificates of payment aggregating $750,000, the owner was obligated to release 5% of the retainage to Kolker, "providing that the

Contractor is otherwise in full compliance with its obligations under this Agreement and that there are no unsettled claims then pending." The architect's certificates totalled $750,000, but CPA withheld payment of any portion of the retainage because of Kolker's default.

It is implicit in the trial judge's findings that Kolker had not complied with its obligations under the contract and that there were many substantial unsettled claims pending against Kolker, all of which constituted the factual underpinning of the finding that Kolker defaulted under its contract. In fact, subsequent litigation between CPA and Kolker resulted in a consent judgment for $45,000 in favor of CPA against Kolker for the breach of contract.

As a consequence of the foregoing, the trial judge concluded that CPA was legally justified in withholding the total 10% retainage and that as of the time of the filing of the stop notices there were no moneys rightfully due from CPA to Kolker which should have been withheld for the benefit of the stop notice claimant. Not only did the judge find that plaintiff had failed to carry its burden of proving that defendant owed contract moneys to ...


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